Some years ago in its 2020 Report, Intuit® reported the number of freelancers and contractors would increase, and today, Fiverr, Uber and many other companies have validated this predicted rise in contractor-style employment, commonly referred to as the gig economy. This growing market presents tax and accounting professionals with the opportunity to establish a profitable niche that targets gig workers.
While there is an enormous allure having a flexible schedule, freedom from corporate red tape and the chance to earn more money, there are also many responsibilities and challenges facing gig economy workers. These include the following:
- No job security: In an interview with Science X, Susan Coombes, an associate professor at Virginia Commonwealth University, explained that the absence of a consistent wage means that contractors have no sense of job stability and often struggle with maintaining a healthy cash flow.
- Unawareness of responsibilities: Individuals within the gig economy appreciate the freedom of being self employed, yet are often unaware of the accompanying responsibility. Managing taxes, retirement and health insurance is a real challenge that few are prepared to tackle without expert guidance.
- Navigating complex issues: Freelancers and others are often unequipped to deal with complex situations that accompany contractor-style employment. Corporate inconsistency in answering the employee or contractor classification question frequently causes gig workers to deal with absent or delayed payments, and missing tax forms.
Tax Planning for Gig Economy Clients
A critical need within the gig economy is education and instruction on tax planning and compliance, especially in light of the Tax Cuts and Jobs Act. Many workers are unaware that they need to pay self-employment taxes, income and state taxes. At our firm, we find clients need help in saving for tax season and, certainly, for their future; making estimated tax payments; collecting, organizing and filing 1099s; and maximizing credits and deductions. In addition, gig workers are especially inclined to lump personal and business expenses together into one account, rather than properly separating them.
Setting clients up with a solid foundation and providing legitimate tax strategies will increase their trustin you, providing opportunities to expand your role in their business success.
Developing an Advisory Model for Gig Workers
As you discover opportunities for maximizing tax deductions and tax credits, while avoiding penalties, you’ll be able to add more value by developing an advisory services practice. Using cloud accounting software such as Quickbooks® Online allows you to easily share and discuss business’ financial data. This collaborative relationship provides the opportunity to align tax strategies and adjust financial goals to overcome critical challenges, such as maintaining consistent cash flow.
To create time for this in-depth research and discussion on improving your clients’ business, you’ll need to automate or eliminate unnecessary data entry, and eliminate inefficient value metrics, including time tracking and billable hours. To begin implementing an advisory model within your firm, you’ll need to develop and introduce bundled services tailored to workers within the gig economy.
Tailoring Bundled Services for High Impact and Value
Once you’ve established an advisory model with a few clients, the next step is to begin providing your services as packages or bundles. As you develop your bundled services, it’s helpful to look to existing examples of contractor-focused firms and use them to inspire your firm’s focus.
The founder of Gigcountant, Sammy Lennox, uses relatable language and imagery throughout his website to describe the challenges facing gig workers. On his pricing page, Sammy explains some of the most common services required by independent contractors, including tax preparation, monthly bookkeeping and a one-time review of financial records. Overall, while there are no bundled services clearly outlined, Lennox’s website serves as an excellent way to speak to gig workers in a relatable and personal style.
In her firm, dubbed “the accountants for creatives,” Amy Northard’s leverages her partner’s previous experience as the owner of a marketing agency to design tailored solutions for creative professionals through full-service bookkeeping and a fractional CFO option. Interestingly, Amy’s CFO offerings are described as an annual DIY service, providing access to an online classroom and guides, a monthly Q&A session, and a private Facebook group. By understanding her audience, Amy was able to design two services that help her meet the needs of her target clients, while increasing her firm’s profitability.
While targeting all gig workers is an option, you may find yourself focusing on subsets, such as Airbnb owners, multi-level marketers, and Uber or Lyft drivers. Amy’s focus on creatives helps her firm align its marketing and core services on a shared vision, as well as the ability to introduce valuable additions, such as a Facebook group, that are actually useful to her audience.
As the gig economy continues to grow, establishing your firm’s position within this market is worth consideration. Whether you choose to be a specialist or niche firm, now is the best time to assess your firm’s direction for the future.
Author’s Note: This article was originally published on Intuit’s ProConnect blog for accountants and tax professionals. View the original article here.